AutoNation 2003 Annual Report Download - page 66

Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2003, the Company had an aggregate $329.7 million outstanding under two mortgage facilities with automotive
manufacturers’ captive finance subsidiaries. The facilities have an aggregate capacity of $400.0 million, which includes additional capacity
obtained totaling $100.0 million during 2003. The facilities bear interest at a LIBOR-based interest rate (3.2% and 3.8% weighted average for
2003 and 2002, respectively) and are secured by mortgages on certain of the Company’s stores’ property. The Company drew additional
amounts totaling $183.6 million of its available capacity under the mortgage facilities during 2003.
The Company’s revolving credit facilities, the indenture for the Company’s senior unsecured notes and the mortgage facilities contain
numerous customary financial and operating covenants that place significant restrictions on the Company, including the Company’s ability
to incur additional indebtedness, to create liens or other encumbrances, to make certain payments (including dividends and share
repurchases), and make investments, and to sell or otherwise dispose of assets and merge or consolidate with other entities. The revolving
credit facilities also require the Company to meet certain financial ratios and tests, including financial covenants requiring the maintenance of
consolidated maximum cash flow leverage, minimum interest coverage, and maximum balance sheet leverage. Over the life of the
revolving credit facilities, certain of the financial covenants become more restrictive as prescribed by a predetermined schedule. In addition,
the senior unsecured notes contain a minimum fixed charge coverage incurrence covenant, and the mortgage facilities contain both
maximum cash flow leverage and minimum interest coverage covenants. In the event that the Company were to default in the observance
or performance of any of the financial covenants in the revolving credit facilities or mortgage facilities and such default were to continue
beyond any cure period or waiver, the lender under the respective facility could elect to terminate the facility and declare all outstanding
obligations under such facility immediately payable. Under the senior unsecured notes, should the Company be in violation of the financial
covenants, it could be further limited in incurring certain additional indebtedness. The Company’s revolving credit facilities, the indenture for
the Company’s senior unsecured notes and the mortgage facilities have cross-default provisions that trigger a default in the event of an
uncured default under other material indebtedness of the Company. At December 31, 2003, the Company was in compliance with the
requirements of all such financial covenants.
In the event of a downgrade in the Company’s credit ratings, none of the covenants described above would be impacted. The interest rates
charged under the revolving credit facilities are impacted by the credit ratings of those facilities.
Within the meaning of Regulation S-X, Rule 3-10, AutoNation, Inc. (the parent company) has no independent assets or operations, the
guarantees of its subsidiaries are full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries are
minor.
During 2000, the Company entered into a sale-leaseback transaction involving its corporate headquarters facility that resulted in net
proceeds of approximately $52.1 million. This transaction was accounted for as a financing, wherein the property remains on the books and
continues to be depreciated. The Company has the option to renew the lease at the end of the ten-year lease term subject to certain
conditions. The gain on this transaction has been deferred and will be recognized at the end of the lease term, including renewals. At
December 31, 2003, the remaining obligation related to this transaction is included in Other Debt in the above table.
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